The Impact of Technological Disruption on Islamic Banking Operations
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Background of the Study
Technological disruption is reshaping the financial services landscape globally, and Islamic banking is no exception. Emerging technologies such as artificial intelligence, big data, and cloud computing are transforming operational processes, enhancing efficiency, and driving innovation in product development (Ibrahim, 2023). Islamic banks are increasingly incorporating these disruptive technologies to optimize service delivery while maintaining strict Shariah compliance. Technological disruption facilitates real-time data analytics, automated compliance monitoring, and enhanced customer engagement through digital platforms (Al-Hassan, 2024). These advancements are crucial for addressing the challenges of a rapidly evolving financial environment, enabling Islamic banks to respond quickly to market changes and maintain competitive advantage. However, the adoption of new technologies also poses challenges in terms of integration with legacy systems and ensuring that innovations adhere to ethical and religious standards (Rahman, 2025). As a result, understanding the impact of technological disruption on Islamic banking operations is essential for developing strategies that harness benefits while mitigating risks.
Statement of the Problem
Despite significant investments in digital technologies, Islamic banks face challenges in managing technological disruption. One major issue is the compatibility of modern digital systems with existing legacy infrastructures, which often leads to integration problems and operational inefficiencies (Ibrahim, 2023). Additionally, the rapid pace of technological change creates uncertainty in strategic planning, as current innovations may quickly become obsolete. Regulatory challenges and cybersecurity risks further complicate the adoption process. Furthermore, internal resistance and limited technical expertise can slow the pace of digital transformation, affecting overall service quality and customer satisfaction (Al-Hassan, 2024). These issues create a gap between the potential benefits of technological disruption and its practical implementation in Islamic banking operations, necessitating a comprehensive evaluation to propose effective solutions.
Objectives of the Study
- To assess the impact of technological disruption on the operational efficiency of Islamic banks.
- To identify challenges in integrating new technologies with legacy systems.
- To recommend strategies to mitigate risks and enhance digital transformation.
Research Questions
- How does technological disruption affect the operational performance of Islamic banks?
- What are the key challenges in integrating digital innovations with legacy systems?
- What measures can improve the adoption and sustainability of disruptive technologies?
Research Hypotheses
- Technological disruption significantly enhances operational efficiency when integrated properly.
- Integration challenges negatively impact the benefits of digital transformation.
- Strategic investments in training and technology upgrades improve outcomes.
Scope and Limitations of the Study
The study focuses on Islamic banks in emerging markets undergoing digital transformation. Data will be collected from internal reports, IT assessments, and expert interviews. Limitations include the rapid evolution of technology and regional differences in digital infrastructure.
Definitions of Terms
– Technological Disruption: Significant changes brought by new digital technologies.
– Legacy Systems: Older technology infrastructures in use within banks.
– Digital Transformation: The process of integrating digital technology into all aspects of banking operations.
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